##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 1-14164
 SUN-TIMES MEDIA GROUP,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

95-3518892(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification Number)350 North Orleans Street, 10-SChicago, Illinois

60654(Address of Principal Executive
    Office)

(Zip Code)   Registrants telephone number, including area code(312) 321-2299
  Securities registered pursuant to Section 12(b) of the
    Act:
    None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Title of Each
    Class:
 
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ




---



##### 





TABLE OF
    CONTENTS
  SUN-TIMES
    MEDIA GROUP, INC.
  2008
    FORM 10-K
   
 PagePART IItem 1.


Business


4Item 1A.


Risk Factors


11Item 1B.


Unresolved Staff Comments


16Item 2.


Properties


16Item 3.


Legal Proceedings


17Item 4.


Submission of Matters to a Vote of Security
    Holders


21PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


21Item 6.


Selected Financial Data


22Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


23Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


41Item 8.


Financial Statements and Supplementary Data


41Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


41Item 9A.


Controls and Procedures


41Item 9B.


Other Information


43PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


43Item 11.


Executive Compensation


45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


55Item 13.


Certain Relationships and Related Transactions


56Item 14.


Principal Accountant Fees and Services


58PART IVItem 15.


Exhibits and Financial Statement Schedules


59EX-10.42EX-10.43EX-21.1EX-31.1EX-31.2EX-32.1EX-32.2   2




---



##### Table of Contents



FORWARD-LOOKING
    STATEMENTS
  Form 10-K 10-K)
  
    the filing by the Company and its U.S. subsidiaries for
    relief under Chapter 11 of the United States Bankruptcy
    Code (the Bankruptcy Code). The Company has prepared
    the financial statements, included elsewhere herein, under the
    assumption it will continue to realize its assets and settle its
    liabilities in the normal course of business. The outcome of the
    proceedings under the Bankruptcy Code will likely result in
    material changes to the Companys operations and financial
    condition. Currently, it is not possible to accurately predict
    the outcome of the Chapter 11 proceedings, including the
    impact on the Companys financial condition or the ultimate
    effect on the interests of the Companys creditors and
    stakeholders.
    the resolution of certain United States and foreign tax matters;
    changes in the preferences of readers and advertisers,
    particularly in response to the growth of Internet-based media
    and Internet-based classified and other advertising;
    actions of competitors, including price changes and the
    introduction of competitive service offerings;
    changes in prevailing economic conditions, particularly as they
    affect Chicago, Illinois and its metropolitan area;
    adverse developments in pending litigation involving the Company
    and its affiliates, and former directors and officers;
    actions arising from continuing investigations by the Securities
    and Exchange Commission and other government agencies in the
    United States and Canada, principally of matters identified by a
    special committee of independent directors formed to investigate
    related party transactions and other payments made to certain
    executives of the Company and Hollinger Inc. and other
    affiliates in connection with the sale of certain of the
    Companys assets and other transactions;
    the effects of recent and future outsourcing efforts;
    the effects of changing costs or availability of raw materials,
    primarily newsprint;
    changes in laws or regulations, including changes that affect
    the way business entities are taxed;
    changes in accounting principles or in the way such principles
    are applied; and
    other matters identified in Item 1A  Risk
    Factors.  10-K 10-K
 3




---



##### Table of Contents



PART I  Item 1.
    Business  Bankruptcy
    and Insolvency Filings
  No. 09-11092 debtors-in-possession. debtor-in-possession,
         4




---



##### Table of Contents



Overview
  Form 10-K 10-K)
  Chicago Sun-Times,
    Post-Tribune, SouthtownStar
    General
  (312) 321-2299.
  Business
    Strategy
  Evaluate Strategic Alternatives. and/or
  Aggressively Target Cost Reductions and Operating
    Efficiencies.
  Increase Market Share by Leveraging the Companys
    Leading Market Position. Chicago Sun-Times.
 5.1




---



##### Table of Contents



Publish Relevant and Trusted High Quality
    Newspapers.
  Strong Corporate Governance Practices.
  Internet Initiatives. www.suntimes.com www.searchchicago.com/autos, www.searchchicago.com/homes www.neighborhoodcircle.com www.yourseason.com
  Recent
    Developments
      Legal Proceedings  CanWest
    Arbitration.
  Bankruptcy and Insolvency
    Proceedings.
  Sun-Times
    Media Group
   6




---



##### Table of Contents



Chicago Sun-Times Chicago
    Sun-Times
  Chicago Sun-Times SouthtownStar Post-Tribune Herald News Courier News Beacon News Naperville Sun Lake County News-Sun
  Sources of Revenue.
  Year Ended December 31,2008


2007


2006(Dollars in thousands)Advertising

$
242,628



75
%

$
287,198



77
%

$
324,607



77
%Circulation


74,831



23
%


77,629



21
%


85,235



20
%Job printing and other


6,391



2
%


7,431



2
%


10,537



3
%Total

$
323,850



100
%

$
372,258



100
%

$
420,379



100
%     Advertising. run-of-press Chicago
    Sun-Times Chicago Sun-Times
  Circulation. Chicago Sun-Times
 7




---



##### Table of Contents



CirculationDaily(1)


Saturday


Sunday


ABC Audit Report PeriodChicago Sun-Times (Chicago, IL)


319,202



228,996



246,217


52 weeks ending 3/30/08SouthtownStar (Tinley Park, IL)(2)


41,868



33,047



63,106


52 weeks ending 3/30/08The Beacon News (Aurora, IL)


27,400



26,692



28,764


52 weeks ending 3/30/08The Courier News (Elgin, IL)


11,950



11,708



12,152


52 weeks ending 3/30/08The Herald News (Joliet, IL)


39,759



39,081



42,869


52 weeks ending 3/30/08Lake County News-Sun (Waukegan, IL)


17,494







19,332
(3)

52 weeks ending 3/30/08Naperville Sun (Naperville, IL)


15,930







15,690


52 weeks ending 3/30/08Post-Tribune (Merrillville, IN)


62,147



59,069



62,990


52 weeks ending 3/30/08Pioneer Press Group (Glenview, IL)


164,684
(4)









52 weeks ending 3/30/08The Doings Group (Hinsdale, IL)


16,918
(4)









52 weeks ending 3/30/08Free Distribution Products (Suburban Chicago)


268,934
(5)









Unaudited     (1)
    
    Daily circulation is defined as a Monday through Friday average(2)
    
    On November 18, 2007, the name of the Daily Southtown was
    changed to The SouthtownStar; circulation listed is for
    November 18, 2007 to March 30, 2008(3)
    
    All weekend circulation included in Sunday column(4)
    
    Wednesday or Thursday circulation; weekly publications(5)
    
    Average unaudited circulation for 13 free distribution products,
    as of December 31, 2008  Chicago Sun-Times Chicago Sun-Times Chicago Sun-Times
  Chicago Sun-Times
  Daily Southtown Star SouthtownStar 26-week
  Other Publications and Business
    Enterprises. Suntimes.com
 8




---



##### Table of Contents



www.searchchicago.com/autos
  Sales and Marketing. on-site Chicago
    Sun-Times
  Distribution. Chicago Sun-Times Chicago Sun-Times The outsourcing
    of significant business processes may expose the Company to
    significant financial and customer service risk.
  Printing.
  Competition. Chicago Sun-Times Chicago Tribune Chicago Sun-Times
  Employees and Labor Relations.
   9




---



##### Table of Contents



Raw Materials.
  Reorganization Activities.
  Environmental
    Seasonality
    Intellectual
    Property
    Available
    Information
    1-800-SEC-0330. (http://www.sec.gov).
 10




---



##### Table of Contents



www.thesuntimesgroup.com. Form 10-K, Form 10-Q, Form 8-K
    www.thesuntimesgroup.com.
  Item 1A.
    Risk
    Factors      Risks
    Relating to the Companys Business and the
    Industry
  The
    Company and its domestic subsidiaries filed voluntary petitions
    under Chapter 11 of the U.S. Bankruptcy Code and its
    Canadian subsidiaries will likely apply for court-supervised
    reorganization.
  10-K,
    The
    Company has substantial potential tax liabilities.
   11




---



##### Table of Contents



Competition
    in the newspaper industry originates from many sources. The
    advent of new technologies and industry practices, such as the
    provision of newspaper content on free Internet sites, may
    continue to result in decreased advertising and circulation
    revenue.
    The
    Companys revenue is dependent upon economic conditions in
    the Companys target markets and is seasonal.
   12




---



##### Table of Contents



The
    Companys publications have experienced declines in
    circulation in the past and may do so in the
    future.
    The
    Company has implemented cost saving strategies that have not and
    may not result in profitability.
    The
    Company may not be able to realize the value of certain
    investments at their carrying value.
  back-up
 13




---



##### Table of Contents



 Legal Proceedings 
    CanWest Arbitration.
  The
    Companys senior management team is required to devote
    significant attention to matters arising from the Filings and
    the sale process.
   14




---



##### Table of Contents



The
    outsourcing of significant business processes may expose the
    Company to significant financial and customer service
    risk.
    Sun-Times
    Media Group, Inc. is a holding company and relies on its
    subsidiaries to meet its financial obligations.
    The
    Companys internal control over financial reporting is not
    effective as of December 31, 2008 and weaknesses in the
    Companys internal controls and procedures could have a
    material adverse effect on the Company.
   Controls and Procedures.
    The
    Company may experience labor disputes, which could slow down or
    halt production or distribution of the Companys newspapers
    or other publications.
    Newsprint
    represents the Companys single largest raw material
    expense and changes in the price of newsprint could affect net
    income.
   15




---



##### Table of Contents



All of
    the Companys operations are concentrated in one geographic
    area.
    Pending
    litigation could have a material adverse effect on the
    Company.
  and/or  Legal Proceedings
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Chicago Sun-Times. Chicago Sun-Times 15-year
       16




---



##### Table of Contents



Item 3.
    Legal
    Proceedings  Bankruptcy
    and Insolvency Filings
   Business 
    Bankruptcy and Insolvency Filings
  Litigation
    Involving Controlling Stockholder, Senior Management and
    Directors
  Hollinger International Inc. v.
    Hollinger Inc., et al No. 04C-0698.
    Stockholder
    Class Actions
  In re Hollinger International Inc. Securities
    Litigation,
    No. 04C-0834 and/or
 17




---



##### Table of Contents



Sun-Times
    Media Group, Inc. v. Black
  No. 3518-VCS, United States v. Black, et al.  Federal
    Criminal Actions Against Ravelston and Former Company
    Officials
  Black v.
    Breeden, et al.
    United
    States Securities and Exchange Commission v. Conrad M.
    Black, et al.
        Form 10-K, Form 10-K,
 18




---



##### Table of Contents



Receivership
    and CCAA Proceedings in Canada Involving the Ravelston
    Entities
     Hollinger Inc. CCAA Proceedings
  Federal
    Criminal Actions Against Ravelston and Former Company
    Officials
  Federal
    Criminal Actions Against Ravelston and Former Company
    Officials
     19




---



##### Table of Contents



CanWest
    Arbitration
      CanWest
    and The National Post Company v. Hollinger Inc., Hollinger
    International Inc., the Ravelston Corporation Limited and
    Ravelston Management, Inc.
  National Post
    Other
    Matters
    Other Matters
 20




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   Business  Recent
    Developments
 PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    mark-up,
  CashPrice Range


DividendsCalendar Period

High


Low


per Share2007First Quarter

$
6.05


$
3.82


$
Second Quarter


6.94



4.82



Third Quarter


5.83



2.18



Fourth Quarter


2.87



0.85



2008First Quarter

$
2.45


$
0.65


$
Second Quarter


0.88



0.32



Third Quarter


0.49



0.11



Fourth Quarter


0.16



0.02



2009Through March 31, 2009

$
0.10


$
0.01


$
     Recent
    Sales of Unregistered Securities
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Stockholder
    Return Performance Graph
   21




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share amounts)Statement of Operations Data(1):Operating revenue:Advertising

$
242,628


$
287,198


$
324,607


$
357,820


$
362,355Circulation


74,831



77,629



85,235



89,527



91,632Job printing


3,033



4,785



8,260



9,194



8,648Other


3,358



2,646



2,277



2,725



3,412Total operating revenue


323,850



372,258



420,379



459,266



466,047Operating costs and expenses(2)


678,486



480,405



425,451



438,460



465,777Depreciation and amortization


26,665



32,074



33,878



30,721



31,109Operating loss


(381,301
)


(140,221
)


(38,950
)


(9,915
)


(30,839
)Interest expense


(302
)


(603
)


(704
)


(935
)


(19,824
)Interest and dividend income


4,936



17,811



16,813



11,625



11,427Other income (expense), net(3)


10,039



(27,844
)


2,642



(3,839
)


(87,790
)Loss from continuing operations before income taxes


(366,628
)


(150,857
)


(20,199
)


(3,064
)


(127,026
)Income tax (benefit)


(13,129
)


(420,888
)


57,431



42,467



29,462Income (loss) from continuing operations


(353,499
)


270,031



(77,630
)


(45,531
)


(156,488
)Income from discontinued operations (net of income taxes)






1,599



20,957



33,965



390,228Net income (loss)

$
(353,499
)

$
271,630


$
(56,673
)

$
(11,566
)

$
233,740Diluted earnings per share:Earnings (loss) from continuing operations

$
(4.31
)

$
3.35


$
(0.91
)

$
(0.50
)

$
(1.73
)Earnings from discontinued operations






0.02



0.25



0.37



4.31Net earnings (loss)(4)

$
(4.31
)

$
3.37


$
(0.66
)

$
(0.13
)

$
2.58Cash dividends per share paid on Class A and Class B
    Common Stock

$



$



$
0.20


$
5.70


$
0.20   As of December 31,2008


2007


2006


2005


2004(In thousands)Balance Sheet Data(1):Working capital (deficiency)(5)

$
53,263


$
114,484


$
(392,332
)

$
(369,572
)

$
(153,338
)Total assets(6)


309,739



791,586



899,859



1,065,328



1,738,898Long-term debt






38



6,908



8,067



14,333Total stockholders equity (deficit)


(498,719
)


(75,009
)


(359,783
)


(169,851
)


152,186     (1)
    
    The Companys Sun-Times News Group newspaper operations are
    on a 52 week/53 week accounting cycle. This generally
    results in a reporting of 52 weeks or 364 days in each
    annual period. However, the year ended December 31, 2006
    contains 53 weeks. This additional week added approximately
    $5.0 million to advertising revenue, $1.5 million to
    circulation revenue, $6.6 million to total operating
    revenue, $6.1 million in total 22




---



##### Table of Contents



operating expenses and $0.5 million in operating income.
    The Statement of Operations Data above and the following
    discussions include the impact of the 53rd week.(2)
    
    The year ended December 31, 2008, includes $209,269 for
    impairment of all goodwill and intangible assets and $71,866 for
    the impairment of property, plant and equipment. See
    Note 17 to the consolidated financial statements.(3)
    
    The principal components of Other income (expense),
    net are presented below:  2008


2007


2006


2005


2004(In thousands)Loss on extinguishment of debt

$



$
(60
)

$



$



$
(60,381
)Write-down of investments


(8,700
)


(12,200
)










(365
)Write-down and expenses related to FDR Collection


(1,500
)










(795
)


Gain (loss) on Participation Trust and CanWest Debentures,
    including exchange gains and losses


















(22,689
)Foreign currency gains (losses), net


18,437



(16,569
)


2,943



(2,171
)


1,634Legal settlement














(800
)


Settlements with former directors and officers


















1,718Gain (loss) on sale of investments


1,108



1,019



(76
)


2,254



1,709Gain on sale of non-operating assets


















1,090Gain related to life insurance settlement


1,002















Equity in losses of affiliates, net of dividends received


(74
)


(184
)


(259
)


(1,752
)


(3,897
)Other


(234
)


150



34



(575
)


(6,609
)$
10,039


$
(27,844
)

$
2,642


$
(3,839
)

$
(87,790
)     (4)
    
    The Companys diluted earnings per share are calculated on
    the following number of shares outstanding (in thousands):
    2008  82,010, 2007  80,661,
    2006  85,681, 2005  90,875,
    2004  90,486.(5)
    
    Excludes escrow deposits and restricted cash, assets and
    liabilities of operations to be disposed of and current
    installments of long-term debt.(6)
    
    Includes goodwill and intangible assets, net of accumulated
    amortization, of $nil at December 31, 2008,
    $212.5 million at December 31, 2007,
    $216.9 million at December 31, 2006,
    $221.1 million at December 31, 2005 and
    $225.5 million at December 31, 2004.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  General
   23




---



##### Table of Contents



Overview
  Chicago
    Sun-Times, Post-Tribune, SouthtownStar, Naperville Sun
          Developments
    Since December 31, 2008
         24




---



##### Table of Contents



Legal Proceedings 
    CanWest Arbitration.
  Bankruptcy and Insolvency
    Proceedings.
  Significant
    Transactions in 2008
  Impairment
    of Goodwill, Intangible and Other Long-Lived
    Assets
    Significant
    Developments Related to Hollinger Inc.
       25




---



##### Table of Contents



and/or
        Other
    Significant Developments in 2008
   26




---



##### Table of Contents



Legal Proceedings  CanWest Arbitration.
 27




---



##### Table of Contents



Incurred SinceInception throughYear Ended December 31,


December 31,2008


2007


2006


2008(6)(In thousands)Special Committee investigation costs(1)

$
3,462


$
6,216


$
4,743


$
67,142Litigation costs(2)


713



1,533



6,376



29,191Indemnification fees and costs(3)


9,396



47,776



18,949



119,110Recoveries(4)


(2,000
)


(47,718
)


(47,475
)


(129,568
)$
11,571


$
7,807


$
(17,407
)


85,875(33,265
)(5)$
52,610
(7)     (1)
    
    Costs and expenses arising from the Special Committees
    investigation. These amounts include the fees and costs of the
    Special Committees members, counsel, advisors and experts.
    The Special Committee was dissolved in November 2008, and the
    Committees related legal matters were turned over to the
    Companys Board of Directors and management.(2)
    
    Largely represents legal and other professional fees to defend
    the Company in litigation that has arisen as a result of the
    issues the Special Committee has investigated, including costs
    to defend the counterclaims of Hollinger Inc. and Black. In
    2006, these costs include a $3.5 million settlement paid to
    Tweedy, Browne & Company, LLC in the second quarter in
    settlement for legal fees.(3)
    
    Represents amounts the Company has been required to advance in
    fees and costs to indemnified parties, including the indirect
    former controlling stockholders and their affiliates and
    associates who are defendants in the litigation brought by the
    Company or resulting from criminal proceedings. See
    Black v. Hollinger International Inc.described in the Companys previous filings.(4)
    
    Represents recoveries directly resulting from the investigation
    activities which includes reimbursement by Hollinger Inc. for
    $2.0 million of the Companys legal fees that were
    incurred in connection with Hollinger Inc.s CCAA
    proceedings, a 2007 settlement, negotiated and approved by the
    Special Committee, with Radler, (including his wholly-owned
    company, North American Newspapers Ltd. f/k/a F.D. Radler Ltd.)
    and the publishing companies Horizon Publishing Company
    (Horizon) and Bradford Publishing Company
    (Bradford). The Company received $63.4 million
    in cash to settle the following: (i) claims by the Company
    against Radler, Horizon and Bradford, (ii) potential
    additional claims against Radler related to the Special
    Committees findings regarding incorrectly dated stock
    options and (iii) amounts due from Horizon and Bradford.
    The Company recorded $47.7 million of the settlement, as a
    recovery, within Indemnification, investigation and
    litigation costs, net of recoveries and $7.2 million
    in Interest and dividend income in the Consolidated
    Statement of Operations for the year ended December 31,
    2007. The remaining $8.5 million represents the collection
    of certain notes receivable. In 2006, recoveries include
    approximately $47.5 million in a settlement with certain of
    the Companys directors and officers insurance carriers net
    of approximately $2.5 million paid to Cardinal Value Equity
    Partners L.P.s counsel as attorney fees directly
    attributable to this settlement. This settlement was approved by
    the Delaware Court of Chancery in November 2006, and received by
    the Company in January 2007. In 2005, the Company received
    approximately $30.3 million in a settlement with Torys LLP
    and $2.1 million in recoveries of indemnification payments
    from Black. Excludes settlements with former directors and
    officers, pursuant to a restitution agreement reached in
    November 2003, of approximately $1.7 million and
    $31.5 million for the years ended December 31, 2004
    and 2003, respectively, which were included in Other
    income (expense), net in the Consolidated Statements of
    Operations. See Notes 18, 22(a) and 23(e) to the
    consolidated financial statements.(5)
    
    Represents amounts received pursuant to the restitution
    agreement described in (4) above.(6)
    
    The Special Committee was formed on June 17, 2003. These
    amounts represent the cumulative net costs from that date. 28




---



##### Table of Contents



(7)
    
    Including the $7.2 million and $8.5 million received
    from Radler in interest and payment of notes receivable,
    respectively (see (4) above), and the Companys
    potential share of insurance proceeds held in escrow (see
    Note 22(a) to the consolidated financial statementsStockholder Class Actions) of
    $20.8 million, the amounts collected by the Special
    Committee aggregate $199.3 million and total expenses
    aggregate $215.4 million.    Critical
    Accounting Policies and Estimates
      Accruals
    for Contingent Tax Liabilities
      Investments
       29




---



##### Table of Contents



 Legal Proceedings 
    CanWest Arbitration.
  Allowance
    for Doubtful Accounts
    Impairment
    of Goodwill, Intangible and Other Long-Lived
    Assets
       30




---



##### Table of Contents



Valuation
    Allowance  Deferred Tax Assets
    Defined
    Benefit Pension Plans and Postretirement Benefits
        2008
    Compared with 2007
  Income
    (Loss) from Continuing Operations  Overview
   31




---



##### Table of Contents



Operating
    Revenue and Operating Loss  Overview
    Operating
    Revenue
        Operating
    Costs and Expenses
         32




---



##### Table of Contents



33




---



##### Table of Contents



Interest
    and Dividend Income
    Other
    Income (Expense), Net
    Income
    Taxes
    2007
    Compared with 2006
  Income
    (Loss) from Continuing Operations  Overview
    Operating
    Revenue and Operating Loss  Overview
   34




---



##### Table of Contents



Operating
    Revenue
        Operating
    Costs and Expenses
           35




---



##### Table of Contents



Chicago Sun-Times
            Interest
    and Dividend Income
    Other
    Income (Expense), Net
   36




---



##### Table of Contents



Income
    Taxes
    Liquidity
    and Capital Resources
  Cash
    and Cash Equivalents
  back-up
  Investments
    Corporate
    Structure
    Bankruptcy
    and Insolvency Filings
  debtors-in-possession. debtor-in-possession,
 37




---



##### Table of Contents



10-K and/or
  Factors
    That Are Expected to Affect Liquidity in the Future
  Potential
    Cash Outlays Related to Accruals for Income Tax Contingent
    Liabilities
    (In thousands)Income taxes payable

$
448Deferred income tax liabilities


9,569Other tax liabilities


607,960$
617,977    38




---



##### Table of Contents



Potential
    Cash Outflows Related to Operations
    Other
  Bankruptcy and Insolvency
  Cash
    Flows
        Debt
   39




---



##### Table of Contents



Leases
    Capital
    Expenditures
    Dividends
    and Other Commitments
    Off-Balance
    Sheet Arrangements
    Commercial
    Commitments and Contractual Obligations
      Due in1 Year or


Due between


Due between


Due overTotal


Less


1 and 3 Years


3 and 5 Years


5 Years(In thousands)Long-term debt

$



$



$



$



$
Operating leases


46,514



5,221



8,003



8,134



25,156Purchase obligations(1)


27,300



9,100



18,200







Total contractual cash obligations(2)

$
73,814


$
14,321


$
26,203


$
8,134


$
25,156     (1)
    
    Pursuant to a ten-year distribution agreement, which is
    terminable upon three years notice. Amounts shown
    represent the base fixed fee component of the distribution
    agreement for three years ($9,100 per year).(2)
    
    Refer to Potential Cash Outlays Related to Accruals for
    Income Tax Contingent Liabilities for a discussion of
    Financial Accounting Standards Board (FASB)
    Interpretation No. 48 Accounting for Uncertainty in
    Income Taxes tax liabilities. Such amounts are excluded
    from this table as the Company is unable to reliably estimate
    the period of cash settlement, if any, with the taxing authority.   Legal Proceedings
  Recent
    Accounting Pronouncements
   40




---



##### Table of Contents



No. FAS 157-2,
        Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk    Item 8.
    Financial
    Statements and Supplementary Data  10-K.
 Item 9.  Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  (a)  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  10-K
 41




---



##### Table of Contents



Rules 13a-15(e) 15d-15(e)
  (b)  Managements
    Report on Internal Control over Financial
    Reporting
            Internal Control  Integrated
    Framework
  Advertising Revenue Recognition:
  
    The controls related to the review and monitoring of advertising
    rates were not operating effectively.
    The review and approval controls related to advertising billing
    and related reconciliation process were not operating
    effectively.
    Within the computer system used to process advertising revenue
    transactions, controls over access to the program and data were
    ineffectively designed and roles were not adequately defined and
    assigned to enforce an effective segregation of duties.  Income Taxes:
   42




---



##### Table of Contents



(c)
    Changes
    in Internal Control over Financial Reporting and Other
    Remediation    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers and Corporate Governance    Name and Age

Position(s) with the CompanyJeremy L. Halbreich, 57

Chairman of the Board and Interim Chief Executive OfficerMichael E. Katzenstein, 49

DirectorThomas L. Kram, 50

Chief Financial OfficerJames D. McDonough, 50

Chief Administrative Officer, General Counsel and SecretaryRobert B. Poile, 49

Vice Chairman of the BoardGraham W. Savage, 60

DirectorRobert A. Schmitz, 68

DirectorBlair Richard Surkamer, 56

President and Chief Operating OfficerBarbara Swanson, 51

Senior Vice President, Advertising and Marketing     Jeremy L. Halbreich
  Michael E. Katzenstein,
  Thomas L. Kram,
  James D. McDonough,
 43




---



##### Table of Contents



Robert B. Poile
  Graham W. Savage
  Robert A. Schmitz
  Blair Richard Surkamer,
  Barbara Swanson,
  Audit
    Committee
    Code of
    Ethics
   44




---



##### Table of Contents



Section 16(a)
    Beneficial Ownership Reporting Compliance
    Item 11.
    Executive
    Compensation  COMPENSATION
    OF EXECUTIVE OFFICERS AND DIRECTORS
  Summary
    Compensation Table for Named Executive Officers
    Non-EquityIncentiveStock


Option


Plan


All otherSalary


Bonus


Awards


Awards


Compensation


Compensation


TotalName and Principal Position

Year


($)(1)


($)


($)(2)


($)


($)


($)


($)Cyrus F. Freidheim, Jr.(3),


2008


$
380,800






$
994,783
(4)









$
12,356
(5)

$
1,387,939Former President and


2007


$
680,000






$
608,879
(4)









$
12,079


$
1,300,958Chief Executive Officer


2006


$
163,561


$
87,561


$
121,189
(4)













$
372,311Blair Richard Surkamer(6),


2008


$
284,625


$
94,875


$
104,017










$
14,266
(7)

$
497,783President and Chief Operating Officer


2007


$
252,962


$
319,062
(8)

$
5,131














$
577,155James D. McDonough(9),


2008


$
250,000


$
84,562


$
141,039










$
7,155
(10)

$
482,756Chief Administrative


2007


$
275,000






$
76,482










$
9,844


$
361,326Officer, General Counsel and Secretary


2006


$
225,000


$
25,000


$
27,694










$
13,090


$
290,784     (1)
    
    In 2008, each of the named executive officers received a grant
    of restricted Class A common stock in lieu of a portion of
    his cash salary as follows: (i) Mr. Freidheim received
    a grant of 262,465 shares of restricted stock in lieu of
    44% of his 2008 base salary of $680,000;
    (ii) Mr. Surkamer received a grant of
    31,625 shares of restricted stock in lieu of 10% of his
    2008 base salary of $316,250; and (iii) Mr. McDonough
    received a grant of 27,500 shares of restricted stock in
    lieu of 10% of his 2008 base salary of $275,000. The grants
    vested 25% 45




---



##### Table of Contents



on each of February 15, May 15, August 15 and
    November 15, 2008 and are reflected under Stock
    Awards and not under Salary.(2)
    
    The amounts in this column (other than $66,255 in 2006, $602,010
    in 2007 and $695,583 in 2008 for Mr. Freidheim (as to which
    see Note (4) to this table below)) reflect the dollar
    amount recognized for financial statement reporting purposes for
    the applicable fiscal year in accordance with Statement of
    Financial Accounting Standards No. 123R Share-Based
    Payment(SFAS No. 123R) with
    respect to (i) awards of DSUs granted in 2007, and
    (ii) awards of restricted stock granted in 2008 as
    described in Note (1) to this table above. Assumptions used
    in the calculation of these amounts are included in Note 15
    to the Companys audited financial statements for the
    fiscal year ended December 31, 2008 included in this Annual
    Report on
    Form 10-K.(3)
    
    Mr. Freidheim became President and Chief Executive Officer
    on November 14, 2006. Prior to that date,
    Mr. Freidheim received compensation as a director of the
    Company. Amount shown under Salary for 2006 includes
    $76,000 of cash director fees paid to Mr. Freidheim in 2006
    and amount shown under Stock Awards for 2006
    includes $54,934 in respect of DSUs granted to
    Mr. Freidheim as a director in 2006.
    Mr. Freidheims employment with the Company terminated
    effective February 28, 2009.(4)
    
    Reflects the dollar amount recognized for financial statement
    reporting purposes for the applicable fiscal year in accordance
    with SFAS No. 123R with respect to (i) awards to
    Mr. Freidheim in December 2007 of 150,000 shares of
    restricted Class A common stock and 386,364 DSUs; and
    (ii) awards to Mr. Freidheim in November 2006 of 7,277
    DSUs (including dividend equivalent DSUs) granted to him as a
    director, 100,000 shares of restricted Class A common
    stock and a stock opportunity award with respect to up to
    400,000 shares of Class A common stock. See
     Employment Agreements  Terms of
    Freidheim Arrangement for a detailed description of the
    2006 awards. Under SFAS No. 123R, the grant date fair value
    of the awards of restricted Class A common stock are
    expensed ratably over the applicable vesting periods. The grant
    date fair value of the 200,000-share portion of the stock
    opportunity award that vests based upon the attainment of
    specified price levels for the Companys Class A
    common stock was estimated for financial statement reporting
    purposes using a Monte Carlo simulation model and the estimated
    fair value is being expensed over the median expected vesting
    periods produced by the Monte Carlo simulation. With respect to
    the EBITDA Award portion of the stock opportunity award, under
    SFAS No. 123R, no expense was recognized for financial
    statement reporting purposes for the fiscal year ended
    December 31, 2006 because the relevant performance targets
    and objectives had not been established as of December 31,
    2006, no expense was recognized for financial statement
    reporting purposes for the fiscal year ended December 31,
    2007 because the Company determined that it was more likely than
    not that the threshold target for the EBITDA Award would not be
    met, and no expense was recognized for financial statement
    reporting purposes for the fiscal year ended December 31,
    2008 because the threshold target for the EBITDA Award was not
    met.(5)
    
    Includes contributions made by the Company under the
    Companys 401(k) plan ($3,063) and perquisites that
    aggregate less than $10,000.(6)
    
    Mr. Surkamer commenced employment with the Company as Vice
    President of Operations on February 12, 2007, became Chief
    Operating Officer-Sun-Times News Group on October 1, 2007
    and became President and Chief Operating Officer of the Company
    on February 11, 2009.(7)
    
    Includes contributions made by the Company under the
    Companys 401(k) plan ($3,063) and perquisites consisting
    of an automobile allowance and reimbursement of club membership
    dues and parking fees, none of which individually exceeds
    $25,000.(8)
    
    Consists of a sign-on bonus ($130,000) and a guaranteed bonus
    ($189,062).(9)
    
    Mr. McDonough became Chief Administrative Officer of the
    Company on February 11, 2009.(10)
    
    Includes contributions made by the Company under the
    Companys 401(k) plan ($3,063) and perquisites that
    aggregate less than $10,000.  Employment
    Agreements
   46




---



##### Table of Contents



Terms
    of Freidheim Arrangement
    Terms
    of Surkamer Arrangement
    Terms
    of McDonough Agreement
   47




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal 2008 Year-End
  Option Awards


Stock AwardsEquityEquity


IncentiveIncentive


PlanEquity














Plan


Awards:Incentive














Awards:


Market orPlan














Number of


PayoutAwards:














Unearned


Value ofNumber of


Number of


Number of








Number of


Market Value


Shares,


UnearnedSecurities


Securities


Securities








Shares or


of Shares


Units or


Shares,Underlying


Underlying


Underlying








Units of


or Units of


Other


Units orUnexercised


Unexercised


Unexercised


Option





Stock That


Stock


Rights That


Other RightsOptions


Options


Unearned


Exercise


Option


Have Not


That Have


Have Not


That Have(#)


(#)


Options


Price


Expiration


Vested


Not Vested


Vested


Not VestedName

Exercisable


Unexercisable


(#)


($/Sh)


Date


(#)


($)(1)


(#)(2)


($)(1)Cyrus F. Freidheim, Jr.(3)






















257,576
(4)

$
12,879



100,000
(5)

$
5,000Blair Richard Surkamer






















75,345
(6)

$
3,767



23,174


$
1,159James D. McDonough






















62,382
(7)

$
3,119



15,449


$
772     (1)
    
    Amounts are calculated based upon the per share closing price of
    the Class A common stock on December 31, 2008 of $0.05.(2)
    
    The amounts in this column (other than those for
    Mr. Freidheim (as to which see Note (5) to this table
    below)) consist of performance-vesting DSUs awarded pursuant to
    the Companys LTIP and 1999 Stock Incentive Plan on
    December 21, 2007. Performance vesting DSUs vest at either
    threshold, target or maximum levels based on Sun-Times News
    Group cumulative EBITDA for 2007 and 2008 and individual
    two-year goals for each participant such that if the EBITDA
    target and individual goals are met, one-half of the DSU will
    vest in the first quarter of 2009 and the other half will vest
    in the first quarter of 2010. Amounts shown are based on full
    vesting of the DSU awards as all DSUs vested automatically upon
    the occurrence of the January 16, 2009 change in control.(3)
    
    Mr. Freidheims employment with the Company terminated
    effective February 28, 2009.(4)
    
    Consists of the unvested portion of a grant of 386,364 DSUs that
    vest
    331/3%
    on each of December 18, 2008, 2009 and 2010, in each case
    subject to continued employment on such date. All DSUs vested
    automatically upon the occurrence of the January 16, 2009
    change in control.(5)
    
    Consists of a grant in November 2006 of a stock
    opportunity award. See  Employment
    Agreements  Terms of Freidheim Arrangement for
    a description of this award. Amounts shown are based on
    achieving threshold performance under both portions of the stock
    opportunity award.(6)
    
    Consists of the unvested portion of (i) a grant of 89,844
    DSUs that vest
    331/3%
    on each of December 18, 2008, 2009 and 2010; and
    (ii) a grant of 23,174 DSUs that vest
    331/3%
    on each of February 13, 2008, 2009 and 2010, in each case
    subject to continued employment on such date. All DSUs vested
    automatically upon the occurrence of the January 16, 2009
    change in control. 48




---



##### Table of Contents



(7)
    
    Consists of the unvested portion of (i) a grant of 78,125
    DSUs that vest
    331/3%
    on each of December 18, 2008, 2009 and 2010; and
    (ii) a grant of 15,449 DSUs that vest
    331/3%
    on each of February 13, 2008, 2009 and 2010, in each case
    subject to continued employment on such date. All DSUs vested
    automatically upon the occurrence of the January 16, 2009
    change in control.  Potential
    Payments Upon Termination or Change of Control
  Named
    Executive Officers Who Are Still Employed With the
    Company
  Mr. Surkamer
       49




---



##### Table of Contents



nolo contendere
  1 2
    Mr. McDonough
    24-month
 50




---



##### Table of Contents




    the acquisition of securities of the Company representing more
    than fifty percent (50%) of the combined voting power of the
    Companys then outstanding securities; or
    the members of the Board of Directors as of December 29,
    2006 (the Effective Date) and any new directors
    whose election by the Board or nomination by the Board for
    election was approved by a vote of a least two-thirds of the
    directors then still in office who either were in office on the
    Effective Date or whose election or nomination for election was
    previously so approved ceasing for any reason to constitute at
    least a majority of the Board;
    the adoption, enactment or effectiveness of any action that
    materially limits or diminishes the power or authority of the
    Companys board of directors or any committee thereof, if
    such action has not been approved by a vote of a least
    two-thirds of the directors then still in office who either were
    in office on the Effective Date or whose election or nomination
    for election was previously so approved ceasing for any reason
    to constitute at least a majority of the Board; or
    the consummation of, or the execution of a definitive agreement
    the consummation of which would result in, a reorganization,
    merger or consolidation, or sale or other disposition of all or
    substantially all of the assets of the Company to an
    unaffiliated buyer; or
    the shareholder approval of a complete liquidation or
    dissolution of the Company.     51




---



##### Table of Contents



1 2
    Named
    Executive Officers Who Are No Longer Employed With the
    Company
  Mr. Freidheim
  12-month 12-month
  
    the acquisition of securities of the Company representing more
    than fifty percent (50%) of the combined voting power of the
    Companys then outstanding securities; or
    the members of the Board of Directors as of the date on which
    Mr. Freidheims employment began (the Effective
    Date) and any new directors whose election by the Board or
    nomination by the Board for election was approved by a vote of a
    least two-thirds of the directors then still in office who
    either were in office on the Effective Date or whose election or
    nomination for election was previously so approved ceasing for
    any reason to constitute at least a majority of the Board; or
    the adoption, enactment or effectiveness of any action that
    materially limits or diminishes the power or authority of the
    Companys board of directors or any committee thereof, if
    such action has not been approved by a vote of at least
    two-thirds of the directors then still in office who either were
    in office on the Effective Date or whose election or nomination
    for election was previously so approved ceasing for any reason
    to constitute at least a majority of the Board; or
    the consummation of, or the execution of a definitive agreement
    the consummation of which would result in, a reorganization,
    merger or consolidation, or sale or other disposition of all or
    substantially all of the assets of the Company to an
    unaffiliated buyer; or
    the consummation of a complete liquidation or dissolution of the
    Company. 52




---



##### Table of Contents



Rule 13e-3 Rule 13e-3
    Directors
    Compensation
     53




---



##### Table of Contents



Fees Earned or Paidin Cash


Stock Awards


TotalName

($)


($)(1)


($)Current Directors(2)Robert B. Poile(3)

$
57,220


$
1,427


$
58,647Graham W. Savage(4)

$
185,220


$
26,210


$
211,430Former DirectorsWilliam Aziz(5)










Brent D. Baird(5)

$
26,000


$
24,497


$
50,497Albrecht W.A. Bellstedt(5)

$
24,000


$
24,497


$
48,497Herbert A. Denton(4)

$
112,220


$
26,210


$
138,430Peter Dey(4)

$
87,720


$
26,210


$
113,930Cyrus F. Freidheim, Jr.(4)










Edward Hannah(5)(6)

$
15,000


$
38,970


$
53,970Gordon A. Paris(4)

$
173,720


$
26,210


$
199,930Raymond G.H. Seitz(4)

$
316,500


$
75,000


$
391,500G. Wesley Voorheis(5)










     (1)
    
    The amounts reflect the dollar amount recognized for financial
    statement reporting purposes for the fiscal year ended
    December 31, 2008 in accordance with
    SFAS No. 123R with respect to DSUs, which are issuable
    in the form of shares upon the termination of a directors
    service as a member of the Board. These amounts also reflect the
    grant date fair value of the DSUs granted to directors in 2008
    (computed in accordance with SFAS No. 123R). 54




---



##### Table of Contents



Assumptions used in the calculation of these amounts are
    included in Note 15 to the Companys audited financial
    statements for the fiscal year ended December 31, 2008
    included in this Annual Report on Form
    10-K.(2)
    
    Excludes Messrs. Halbreich, Katzenstein and Schmitz who
    were elected to the Companys Board of Directors on
    January 16, 2009.(3)
    
    Mr. Poile was elected to the Companys Board of
    Directors on June 20, 2008.(4)
    
    On January 16, 2009, Messrs. Denton, Dey, Freidheim, Paris
    Savage and Seitz were removed from the Companys Board of
    Directors. On January 30, 2009, Mr. Savage was
    re-elected to the Board of Directors.(5)
    
    Effective June 18, 2008, Messrs. Aziz, Baird,
    Bellstedt, Hannah and Voorheis resigned from the Companys
    Board of Directors.(6)
    
    Includes expense recognized for financial statement reporting
    purposes for the fiscal year ended December 31, 2008 with
    respect to 5,953 DSUs issued to Mr. Hannah on
    March 31, 2008 in respect of his service on the Board of
    Directors from August 1, 2007 through December 31,
    2007. Because these DSUs were not issued until March 31,
    2008, no expense was recognized for financial statement
    reporting purposes for the fiscal year ended December 31,
    2007 with respect to such DSUs.  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Class and Total Number of Shares


PercentName and Address

Beneficially Owned(1)


of ClassHollinger Inc. and affiliates(2)


17,271,923



Class A Common



20.6
%100 King Street West, Suite 3700Toronto, Ontario
    M5X 1C9 CanadaPolar Securities Inc.(3)


9,038,163







10.8
%372 Bay Street,
    21stFloor 
    Toronto, Ontario 
    M5H 2W9 CanadaK Capital Partners, LLC(4)


8,621,312



Class A Common



10.3
%855 Boylston Street,
    11th

    Floor 
    Boston, MA 02116Davidson Kempner Partners(5)


4,858,073



Class A Common



5.8
%65 East 55thStreet,
    19th

    Floor
    New York, NY 10022Cyrus F. Freidheim, Jr.


540,000



Class A Common



*Jeremy L. Halbreich


290,000



Class A Common



*Michael E. Katzenstein


0Thomas L. Kram


35,083



Class A Common



*James D. McDonough


138,477



Class A Common



*Robert B. Poile


62,493



Class A Common



*Graham W. Savage


64,342



Class A Common



*Robert A. Schmitz


0



Class A Common



*Blair R. Surkamer


118,394



Class A Common



*Barbara Swanson


0



Class A Common



*All current directors and executive officers as a group
    (9 persons)(6)


708,789



Class A Common



*     *
    
    An asterisk (*) indicates less than one percent of a class of
    stock. 55




---



##### Table of Contents



(1)
    
    Includes 2,914 shares issuable pursuant to DSUs to
    Mr. Poile.(2)
    
    As reported in Schedule 13D filed with the SEC on
    June 19, 2008.(3)
    
    As reported on a Form 4 filed with the SEC on
    December 30, 2008.(4)
    
    As reported in Schedule 13D filed with the SEC on
    December 18, 2008.(5)
    
    As reported in Schedule 13D filed with the SEC on
    January 22, 2009.(6)
    
    Includes 2,914 shares issuable pursuant to DSUs.
    Mr. Freidheim served as an executive officer of the Company
    during 2008 but his employment with the Company was terminated
    prior to the date hereof. Accordingly, because this line item
    reflects the beneficial ownership of our current directors and
    executive officers, the beneficial ownership of
    Mr. Freidheim is not included herein.  Equity
    Compensation Plan Information
  Number of SecuritiesNumber of Securities


Weighted-Average


Remaining Available forto be Issued Upon


Exercise Price of


Future Issuance UnderExercise of Outstanding


Outstanding Options,


Equity Compensation PlansOptions, Warrants and


Warrants and


(Excluding SecuritiesPlan Category

Rights(a)


Rights(b)


Reflected in Column (a))(c)Equity compensation plans approved by security holders


297,683


$
7.90



1,784,313Equity compensation plans not approved by security holders










Total


297,683


$
7.90



1,784,313   Item 13.
    Certain
    Relationships and Related Transactions  Related
    Party Transactions
         56




---



##### Table of Contents



one-for-one
    and/or
        Director
    Independence
    Certain
    Business Relationships
   57




---



##### Table of Contents



Item 14.
    Principal
    Accountant Fees and Services        Audit Services.
  Audit Related Services.
  Tax Services.
  Other Services. engagement-by-engagement
    2008


2007(In thousands)Audit fees(1)

$
3,200


$
5,500Audit-related fees(2)


5



Total audit and audit related fees


3,205



5,500Tax fees(3)


345



587All other fees






Total fees

$
3,550


$
6,087     (1)
    
    Audit fees for 2008 and 2007 include fees for the annual audit
    and quarterly reviews.(2)
    
    Audit-related fees for 2008 include fees for assistance with SEC
    comment letters.(3)
    
    Tax fees consist of fees for assistance with tax compliance
    matters, assistance with federal, state and international tax
    planning matters and assistance with examinations by taxing
    authorities. 58




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Documents filed as part of this report
  Consolidated Financial Statements and Supplemental
    Schedules.
  List of Exhibits
    ExhibitNo.

Description of Exhibit

Prior Filing3
.1

Restated Certificate of Incorporation.

Incorporated by reference to Exhibit 3.1 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003 filed on
    January 18, 2005.3
.1.2

Certificate of Amendment to Restated Certificate of
    Incorporation.

Incorporated by reference to Exhibit 3.1.2 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 30, 2006 filed on August 9,
    2006.3
.2

Amended and Restated Bylaws of Sun-Times Media Group, Inc.

Incorporated by reference to Exhibit 3.2 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended March 31, 2008 filed on May 9,
    2008.4
.1

Rights Agreement between Hollinger International Inc. and Mellon
    Investor Services LLC as Rights Agent, dated as of January 25,
    2004.

Incorporated by reference to Exhibit 4.1 to Item 5 of
    the Current Report on
    Form 8-K
    dated January 26, 2004.4
.2

Amendment No. 1 to the Rights Agreement between Hollinger
    International Inc. and Mellon Investor Services LLC as Rights
    Agent, dated May 10, 2005.

Incorporated by reference to Exhibit 4.1 to Item 1.01
    of the Current Report on
    Form 8-K
    dated May 11, 2005.4
.3

Amendment No. 2 to the Rights Agreement between Sun-Times Media
    Group, Inc. (f/k/a Hollinger International Inc.) and Mellon
    Investor Services LLC as Rights Agent, dated July 23, 2007.

Incorporated by reference to Exhibit 4.1 to Item 1.01
    of the Current Report on
    Form 8-K
    dated July 26, 2007.4
.4

Amendment No. 3 to Rights Agreement between Sun-Times Media
    Group, Inc. (f/k/a Hollinger International Inc.) and Mellon
    Investor Services LLC as Rights Agent, dated March 25, 2008.

Incorporated by reference to Exhibit 4.1 of the Current
    Report on
    Form 8-K
    filed on March 27, 2008.4
.5

Amendment No. 4 to Rights Agreement between Sun-Times Media
    Group, Inc. (f/k/a Hollinger International Inc.) and Mellon
    Investor Services LLC as the Rights Agent, dated May 14, 2008.

Incorporated by reference to Exhibit 4.1 to the Current
    Report on
    Form 8-K
    dated May 14, 2008.4
.6

Registration Rights Agreement among Sun-Times Media Group, Inc.
    (f/k/a Hollinger International Inc.) and the stockholders named
    therein, dated June 17, 2008.

Incorporated by reference to Exhibit 4.2 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 30, 2008 filed on August 8,
    2008.10
.1

Facilitation Agreement by and between Hollinger International
    Inc., Hollinger Canadian Newspapers, Limited Partnership,
    3815668 Canada Inc., Hollinger Canadian Publishing Holdings Co.,
    HCN Publications Company and CanWest Global Communications Corp.
    dated as of October 7, 2004.

Incorporated by reference to Exhibit 10.2 of the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003 filed on
    January 18, 2005. 59




---



##### Table of Contents



ExhibitNo.

Description of Exhibit

Prior Filing10
.2

Agreement dated November 15, 2003 between Conrad M. Black and
    Hollinger International Inc.

Incorporated by reference to Exhibit 99.1 to Item 5 of
    the Current Report on
    Form 8-K
    dated January 6, 2004.10
.3

Business Opportunities Agreement between Hollinger Inc. and
    Hollinger International Inc., as amended and restated as of
    February 7, 1996.

Incorporated by reference to Exhibit 10.19 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003 filed on
    January 18, 2005.10
.4

Agreement, dated as of May 12, 2005, by and between Hollinger
    International Inc. and RSM Richter Inc., in its capacity as
    court appointed receiver and monitor of Ravelston Corporation
    Limited and Ravelston Management, Inc.

Incorporated by reference to Exhibit 10.7 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2005 filed on
    March 31, 2006.10
.5

Amended Agreement of Compromise and Release of Outside Director
    Defendants Conditioned on Entry of Appropriate Order dated June
    27, 2005.

Incorporated by reference to Exhibit 10.8 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2005 filed on
    March 31, 2006.10
.6

Amended and Restated Employment Agreement by and between Gordon
    A. Paris and Hollinger International Inc. dated as of January
    31, 2006.

Incorporated by reference to Exhibit 10.14 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2005 filed on
    March 31, 2006.10
.7

Amended and Restated Deferred Stock Unit Agreement between
    Gordon A. Paris and Hollinger International Inc. dated as of
    January 31, 2006.

Incorporated by reference to Exhibit 10.21 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2005 filed on
    March 31, 2006.10
.8

Form of Hollinger International Inc. Deferred Stock Unit
    Agreement.

Incorporated by reference to Exhibit 99.1 to Item 8.01
    of the Current Report on
    Form 8-K
    dated February 22, 2005.10
.9

Amended Form of Hollinger International Inc. Deferred Stock Unit
    Agreement.

Incorporated by reference to Exhibit 99.2 to Item 1.01
    of the Current Report on
    Form 8-K
    dated January 25, 2006.10
.10

Summaries of Principal Terms of 2004 Key Employee Retention Plan
    and Key Employee Severance Program.

Incorporated by reference to Exhibit 10.25 to the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003 filed on
    January 18, 2005.10
.11

Hollinger International Inc. 1999 Stock Incentive Plan.

Incorporated by reference to Annex A to the Report on
    Form DEF 14A dated March 24, 1999.10
.12

Hollinger International Inc. 1997 Stock Incentive Plan.

Incorporated by reference to Annex A to the Report on
    Form DEF 14A dated March 28, 1997.10
.13

American Publishing Company 1994 Stock Option Plan.

Incorporated by reference to Exhibit 10.10 to the
    Registration Statement on
    Form S-1
    (No. 33-74980).10
.14

Agreement of Compromise and Release among Cardinal Value Equity
    Partners, L.P., Hollinger International Inc., Dwayne O. Andreas,
    Richard R. Burt, Raymond G. Chambers, Henry A. Kissinger,
    Marie-Josee Kravis, Shmuel Meitar, Robert S. Strauss, A. Alfred
    Taubman, James R. Thompson, Lord Weidenfeld of Chelsea, Leslie
    H. Wexner, Gordon A. Paris, Graham W. Savage and Raymond G.H.
    Seitz dated May 4, 2005.

Incorporated by reference to Exhibit 10.1 to Item 1.01
    of the Current Report on
    Form 8-K
    dated May 5, 2005.10
.15

Hollinger International Inc. 2006 Long-Term Incentive Plan.

Incorporated by reference to Exhibit 99.1 to Item 1.01
    of the Current Report on
    Form 8-K
    dated January 25, 2006. 60




---



##### Table of Contents



ExhibitNo.

Description of Exhibit

Prior Filing10
.16

Separation Agreement between Sun-Times Media Group, Inc. and
    Gordon A. Paris dated September 13, 2006.

Incorporated by reference to Exhibit 10.1 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2006 filed on
    November 9, 2006.10
.17

Amendment, dated November 14, 2006, to Separation Agreement
    between Sun-Times Media Group, Inc. and Gordon A. Paris dated
    September 13, 2006.

Incorporated by reference to Exhibit 99.2 to Item 5.02
    of the Current Report on
    Form 8-K
    dated November 15, 2006.10
.18

Separation Agreement between Sun-Times Media Group, Inc. and
    James Van Horn dated September 13, 2006.

Incorporated by reference to Exhibit 10.2 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2006 filed on
    November 9, 2006.10
.19

Separation Agreement between Sun-Times Media Group, Inc. and
    Robert T. Smith dated September 13, 2006.

Incorporated by reference to Exhibit 10.3 to the Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2006 filed on
    November 9, 2006.10
.20

Description of Material Terms of Compensation of Cyrus F.
    Freidheim, Jr. dated November 14, 2006.

Incorporated by reference to Exhibit 99.1 to Item 5.02
    of the Current Report on
    Form 8-K
    dated November 15, 2006.10
.21

Description of Material Terms of Compensation of William
    Barker III dated February 28, 2007.

Incorporated by reference to Exhibit 10.35 of the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2006.10
.22

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and William G. Barker III dated
    April 10, 2007.

Incorporated by reference to Exhibit 10.5 to the Quarterly
    Report for the quarter ended March 31, 2007.10
.23

Release and Settlement Agreement between F. David Radler and
    Sun-Times Media Group, Inc., dated March 16, 2007.

Incorporated by reference to Exhibit 99.1 of the Current
    Report on
    Form 8-K
    filed on March 22, 2007.10
.24

Release and Settlement Agreement between North America
    Newspapers Ltd. f/k/a FD Radler Ltd. and Sun-Times Media Group,
    Inc., dated March 16, 2007.

Incorporated by reference to Exhibit 99.2 of the Current
    Report on
    Form 8-K
    filed on March 22, 2007.10
.25

Release and Settlement Agreement between Bradford Publishing
    Company and Sun-Times Media Group, Inc., dated March 16, 2007.

Incorporated by reference to Exhibit 99.3 of the Current
    Report on
    Form 8-K
    filed on March 22, 2007.10
.26

Release and Settlement Agreement between Horizon Publications
    Inc., et al. and Sun-Times Media Group, Inc., dated March 16,
    2007.

Incorporated by reference to Exhibit 99.4 of the Current
    Report on
    Form 8-K
    filed on March 22, 2007.10
.27

Employment Agreement between Sun-Times Media Group, Inc. and
    James D. McDonough, dated December 14, 2006.

Incorporated by reference to Exhibit 10.36 of the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2006.10
.28

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and Thomas L. Kram, dated October
    20, 2006.

Incorporated by reference to Exhibit 10.37 of the Annual
    Report on
    Form 10-K
    for the year ended December 31, 2006.10
.29

Distribution Agreement between The Sun-Times Company and Chicago
    Tribune Company, dated August 8, 2007.

Incorporated by reference to Exhibit 10.1 to the Quarterly
    Report for the quarter ended September 30, 2007.10
.30

Sun-Times Media Group, Inc Amended and Restated 1999 Stock
    Incentive Plan.

Incorporated by reference to Appendix A to the Report on
    Form DEF 14A dated May 14, 2007. 61




---



##### Table of Contents



ExhibitNo.

Description of Exhibit

Prior Filing10
.31

Offer Letter from Sun-Times Media Group, Inc. to William Barker
    III, dated February 28, 2007.

Incorporated by reference to Exhibit 10.31 of the Annual
    Report on
    Form 10-K/A
    for the year ended December 31, 2007 filed on
    April 29, 2008.10
.32

Offer Letter from Sun-Times Media Group, Inc. to Rick Surkamer,
    dated January 12, 2007.

Incorporated by reference to Exhibit 10.32 of the Annual
    Report on
    Form 10-K/A
    for the year ended December 31, 2007 filed on
    April 29, 2008.10
.33

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and Rick Surkamer dated January 2007.

Incorporated by reference to Exhibit 10.33 of the Annual
    Report on
    Form 10-K/A
    for the year ended December 31, 2007 filed on
    April 29, 2008.10
.34

Offer Letter from Sun-Times Media group, Inc. to John J. Martin,
    dated January 22, 2007.

Incorporated by reference to Exhibit 10.34 of the Annual
    Report on
    Form 10-K/A
    for the year ended December 31, 2007 filed on
    April 29, 2008.10
.35

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and John J. Martin dated January 22,
    2007.

Incorporated by reference to Exhibit 10.35 of the Annual
    Report on
    Form 10-K/A
    for the year ended December 31, 2007 filed on
    April 29, 2008.10
.36

Master Services Agreement, among the Sun-Times Company,
    individually and on behalf of Chicago Sun-Times LLC, Fox Valley
    Publications LLC, Midwest Suburban Publishing, Inc., Pioneer
    Newspapers Inc. and The Post-Tribune Company LLC, and Affinity
    Express, Inc., dated February 14, 2008.

Incorporated by reference to Exhibit 10.1 to the Quarterly
    Report for the quarter ended March 31, 2008 filed
    May 9, 2008.10
.37

CCAA Plan Term Sheet, among Sun-Times Media Group, Inc.,
    Hollinger Inc., Sugra Limited and 4322525 Canada Inc. dated
    March 25, 2008.

Incorporated by reference to Exhibit 99.1 of the Current
    Report on
    Form 8-K
    filed on March 31, 2008.10
.38

Multi-Party Settlement Term Sheet between Sun-Times Media Group,
    Inc., Hollinger Inc., Sugra Limited, 4322525 Canada Inc. ,
    Davidson Kempner Capital Management LLC and its affiliates,
    dated May 14, 2008.

Incorporated by reference to Exhibit 10.1 to the Quarterly
    Report for the quarter ended June 30, 2008 filed
    August 8, 2008.10
.39

Master Service Agreement, dated February 26, 2008, between The
    Sun-Times Company and Classifieds Plus, Inc.

Incorporated by reference to Exhibit 10.1 to the Quarterly
    Report for the quarter ended September 30, 2008 filed
    November 7, 2008.10
.40

Addendum, dated August 11, 2008, to the Master Service
    Agreement, dated February 26, 2008, between The Sun-Times
    Company and Classifieds Plus, Inc.

Incorporated by reference to Exhibit 10.2 to the Quarterly
    Report for the quarter ended September 30, 2008 filed
    November 7, 2008. 62




---



##### Table of Contents



ExhibitNo.

Description of Exhibit

Prior Filing10
.41

Indenture Trust between Hollinger Canadian Holdings Co. and ARB
    Limited dated August 19, 2008.

Incorporated by reference to Exhibit 10.3 to the Quarterly
    Report for the quarter ended September 30, 2008 filed
    November 7, 2008.10
.42

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and Blair Richard Surkamer, dated
    December 23, 2008.10
.43

Key Employee Severance Program Participation Agreement between
    Sun-Times Media Group, Inc. and David C. Martin, dated December
    23, 2008.21
.1

Significant Subsidiaries of Sun-Times Media Group, Inc.31
.1

Certification of Chief Executive Officer pursuant to Rule
    13a-14(a).31
.2

Certification of Chief Financial Officer pursuant to Rule
    13a-14(a).32
.1

Certificate of Chief Executive Officer pursuant to Rule
    13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
    United States Code.32
.2

Certificate of Chief Financial Officer pursuant to Rule
    13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
    United States Code.  63




---



##### Table of Contents



SIGNATURES
  Form 10-K
  
  By:
    /s/  JEREMY
    L. HALBREICH   Chairman of the Board and
 Interim Chief Executive Officer
      Signature

Title

Date/s/  JEREMY
    L. HALBREICHJeremy
    L. Halbreich

Chairman of the Board, Interim Chief Executive Officer
    (Principal Executive Officer)

April 14, 2009/s/  THOMAS
    L. KRAMThomas
    L. Kram

Senior Vice President and Chief Financial Officer (Principal
    Financial Officer)

April 14, 2009/s/  ALAN
    J. DENNEYAlan
    J. Denney

Corporate Controller

April 14, 2009/s/  ROBERT
    B. POILERobert
    B. Poile

Director

April 14, 2009/s/  GRAHAM
    W. SAVAGEGraham
    W. Savage

Director

April 14, 2009/s/  MICHAEL
    KATZENSTEINMichael
    Katzenstein

Director

April 14, 2009/s/  ROBERT
    A. SCHMITZRobert
    A. Schmitz

Director

April 14, 2009  64




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           Employers Accounting for Defined Benefit Pensions
    and Other Postretirement Plans-an amendment of FASB Statements
    No. 87, 88, 106, and 132(R)
        65




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 December 31,
    2008 and 2007
  2008


2007(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
79,235


$
142,533Accounts receivable, net of allowance for doubtful accounts of
    $10,635 in 2008 and $12,276 in 2007


58,824



73,031Inventories


7,504



7,937Escrow deposits and restricted cash


37,936



35,641Recoverable income taxes






16,509Other current assets


20,055



7,034Total current assets


203,554



282,685Investments


7,807



42,249Property, plant and equipment, net of accumulated depreciation


63,095



163,355Intangible assets, net of accumulated amortization






88,235Goodwill






124,301Prepaid pension asset


33,323



89,512Other assets


1,960



1,249Total assets

$
309,739


$
791,586LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Current installments of long-term debt

$



$
35Accounts payable and accrued expenses


93,115



112,621Amounts due to related parties


9,181



8,852Income taxes payable and other tax liabilities


448



1,027Deferred revenue


9,611



10,060Total current liabilities


112,355



132,595Long-term debt, less current installments






3Deferred income tax liabilities


9,569



58,343Other tax liabilities


607,960



597,206Other liabilities


78,574



78,448Total liabilities


808,458



866,595Stockholders equity (deficit):Class A common stock, $0.01 par value. Authorized
    250,000,000 shares; 104,497,022 and 83,064,567 shares
    issued and outstanding, respectively, at December 2008 and
    88,008,022 and 65,308,636 shares issued and outstanding,
    respectively, at December 31, 2007


1,045



880Class B common stock, $0.01 par value. Authorized
    50,000,000 shares; nil and 14,990,000 shares issued
    and outstanding, respectively, at December 31, 2008 and 2007






150Additional paid-in capital


501,424



501,138Accumulated other comprehensive income (loss):Cumulative foreign currency translation adjustments


(19,491
)


3,878Unrealized gain (loss) on marketable securities


(366
)


141Pension adjustment


(78,801
)


(29,718
)Accumulated deficit


(689,097
)


(325,451
)(285,286
)


151,018Class A common stock in treasury, at cost 
    21,432,455 shares at December 31, 2008 and
    22,699,386 shares at December 31, 2007


(213,433
)


(226,027
)Total stockholders equity (deficit)


(498,719
)


(75,009
)Total liabilities and stockholders equity (deficit)

$
309,739


$
791,586    66




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 For the
    Years Ended December 31, 2008, 2007 and 2006
  2008


2007


2006(In thousands, except per share data)Operating revenue:Advertising

$
242,628


$
287,198


$
324,607Circulation


74,831



77,629



85,235Job printing


3,033



4,785



8,260Other


3,358



2,646



2,277Total operating revenue


323,850



372,258



420,379Operating costs and expenses:Cost of sales:Wages and benefits


95,560



108,569



110,329Newsprint and ink


47,530



50,619



67,196Other


72,720



81,092



80,883Total cost of sales


215,810



240,280



258,408Selling, general and administrative:Sales and marketing


72,499



70,378



66,499Other operating costs


63,737



82,282



66,244Impairment of goodwill, intangible and other long-lived assets


281,135







Corporate expenses


33,734



79,658



51,707Indemnification, investigation and litigation costs, net of
    recoveries


11,571



7,807



(17,407
)Total selling, general and administrative


462,676



240,125



167,043Depreciation


23,398



20,407



21,992Amortization


3,267



11,667



11,886Total operating costs and expenses


705,151



512,479



459,329Operating loss


(381,301
)


(140,221
)


(38,950
)Other income (expense):Interest expense


(302
)


(603
)


(704
)Interest and dividend income


4,936



17,811



16,813Other income (expense), net


10,039



(27,844
)


2,642Total other income (expense)


14,673



(10,636
)


18,751Loss from continuing operations before income taxes


(366,628
)


(150,857
)


(20,199
)Income tax expense (benefit)


(13,129
)


(420,888
)


57,431Income (loss) from continuing operations


(353,499
)


270,031



(77,630
)Discontinued operations, net of income taxes:Income from operations of business segments disposed of










199Gain from disposal of business segments






1,599



20,758Income from discontinued operations






1,599



20,957Net income (loss)

$
(353,499
)

$
271,630


$
(56,673
)Basic earnings (loss) per share:Earnings (loss) from continuing operations

$
(4.31
)

$
3.36


$
(0.91
)Earnings from discontinued operations






0.02



0.25Net earnings (loss)

$
(4.31
)

$
3.38


$
(0.66
)Diluted earnings (loss) per share:Earnings (loss) from continuing operations

$
(4.31
)

$
3.35


$
(0.91
)Earnings from discontinued operations






0.02



0.25Net earnings (loss)

$
(4.31
)

$
3.37


$
(0.66
)Weighted average shares outstanding:Basic


82,010



80,446



85,681Diluted


82,010



80,661



85,681    67




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  2008


2007


2006(In thousands)Net income (loss)

$
(353,499
)

$
271,630


$
(56,673
)Other comprehensive income (loss):Foreign currency translation adjustments, net of related tax
    provision of $1 (2007  net of related tax provision
    of $106; 2006  net of related tax provision of $4)


(23,369
)


(2,698
)


(1,948
)Reclassification adjustment for realized foreign exchange
    (gains) losses upon the substantial reduction of net investment
    in foreign operations










(11,571
)(23,369
)


(2,698
)


(13,519
)Unrealized gains (losses) on marketable securities arising
    during the year, net of a related tax benefit of $nil
    (2007  net of related tax provision of $2;
    2006  net of related tax provision of $4)


(507
)


75



16Reclassification adjustment for realized gains reclassified out
    of accumulated other comprehensive income (loss), net of related
    taxes of $nil (2007  net of related tax provision of
    $nil; 2006  net of related tax provision of $661)










870(507
)


75



886Pension adjustment, net of related tax benefit of $10,713
    (2007  net of related tax provision of $8,166;
    2006  net of related tax provision of $3,117)


(49,083
)


13,694



4,675(72,959
)


11,071



(7,958
)Comprehensive income (loss)

$
(426,458
)

$
282,701


$
(64,631
)    68




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  AccumulatedCommon


Additional


OtherStock


Paid-In


Comprehensive


Accumulated


TreasuryClass A & B


Capital


Income (Loss)


Deficit


Stock


Total(In thousands)Balance at January 1, 2006

$
1,030


$
500,659


$
498


$
(523,229
)

$
(148,809
)

$
(169,851
)Stock-based compensation






2,580















2,580Dividends payable in cash  Class A and
    Class B, $0.15 per share














(12,678
)






(12,678
)Pension adjustment related to the adoption of
    SFAS No. 158










(29,310
)










(29,310
)Minimum pension liability adjustment










4,675











4,675Change in cumulative foreign currency translation adjustments










(13,519
)










(13,519
)Change in unrealized gain on securities, net










886











886Repurchase of common stock


















(95,744
)


(95,744
)Issuance of treasury stock in respect of stock options exercised
    and deferred stock units






(1,112
)






(4,470
)


15,433



9,851Net loss














(56,673
)






(56,673
)Balance at December 31, 2006


1,030



502,127



(36,770
)


(597,050
)


(229,120
)


(359,783
)Stock-based compensation






2,432















2,432Issuance of treasury stock in respect of deferred stock units






(3,421
)






(31
)


3,093



(359
)Minimum pension liability adjustment










13,694











13,694Change in cumulative foreign currency translation adjustments










(2,698
)










(2,698
)Change in unrealized gain on securities, net










75











75Net income














271,630







271,630Balance at December 31, 2007


1,030



501,138



(25,699
)


(325,451
)


(226,027
)


(75,009
)Stock-based compensation






2,179















2,179Issuance of treasury stock in respect of deferred stock units






(2,568
)






(10,147
)


12,594



(121
)Class A common stock issued


15



675















690Minimum pension liability adjustment










(49,083
)










(49,083
)Change in cumulative foreign currency translation adjustments










(23,369
)










(23,369
)Change in unrealized gain (loss) on securities, net










(507
)










(507
)Net loss














(353,499
)






(353,499
)Balance at December 31, 2008

$
1,045


$
501,424


$
(98,658
)

$
(689,097
)

$
(213,433
)

$
(498,719
)    69




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 For the
    Years Ended December 31, 2008, 2007 and 2006
  2008


2007


2006(In thousands)Cash Flows From Continuing Operating Activities:Net income (loss)

$
(353,499
)

$
271,630


$
(56,673
)Income from discontinued operations






(1,599
)


(20,957
)Income (loss) from continuing operations


(353,499
)


270,031



(77,630
)Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by (used in) continuing
    operating activities:Depreciation and amortization


26,665



32,074



33,878Deferred income taxes


17,387



147,454



9,777Collection of proceeds from directors and officers insurance
    settlement






50,000



Write-off of goodwill, intangible and other long-lived assets


281,135







Loss on sale of newspaper operations


10,538



13,603



Write-off of capitalized direct response advertising costs






15,191



Reduction of tax liabilities


(34,732
)


(586,686
)


Bad debt expense related to loan to subsidiary of Hollinger
    Inc.


1,732



33,685



Equity in losses of affiliates


74



184



259Loss (gain) on sales of investments


(1,819
)


(1,019
)


76Gain on sales of property, plant and equipment


(268
)


(269
)


(80
)Write-down of investments


10,200



12,200



Write-down of property, plant and equipment


4,211



1,487



882Other


(12,684
)


11,997



(1,497
)Changes in current assets and liabilities, net of dispositions:Accounts receivable


9,547



3,715



18,338Inventories


433



1,706



2,957Other current assets


1,790



240



(47,890
)Recoverable income taxes


16,509



18,163



(34,672
)Accounts payable and accrued expenses


(21,182
)


(18,892
)


(18,680
)Income taxes payable and other tax liabilities


(255
)


11,724



61,390Deferred revenue and other


(19,894
)


(12,113
)


(7,776
)Cash provided by (used in) continuing operating activities


(64,112
)


4,475



(60,668
)Cash Flows From Investing Activities:Purchase of property, plant and equipment


(16,475
)


(11,645
)


(9,134
)Proceeds from sale of property, plant and equipment


3,522



4,808



231Investments, intangibles and other non-current assets


(67
)


(6,523
)


(7,592
)Collection of notes receivable pursuant to settlement with a
    former officer






8,460



Sale of short-term investments, net










57,650Purchase of investments






(48,200
)


Proceeds on disposal of investments and other assets


25,341



2,039



18,237Proceeds from the sale of newspaper operations, net of cash
    disposed






2,664



86,609Other


138



370



(266
)Cash provided by (used in) investing activities


12,459



(48,027
)


145,735Cash Flows From Financing Activities:Repayment of debt and premium on debt extinguishment


(38
)


(6,976
)


(1,193
)Escrow deposits and restricted cash


(8,113
)


(5,366
)


3,678Net proceeds from issuance of equity securities










9,851Repurchase of common stock










(95,744
)Dividends paid










(17,212
)Other


(121
)


3,046



(1,528
)Cash used in financing activities


(8,272
)


(9,296
)


(102,148
)Net cash provided by (used in) discontinued operations:Operating cash flows










(387
)Investing cash flows










Financing cash flows










7,143Net cash provided by discontinued operations










6,756Effect of exchange rate changes on cash


(3,373
)


9,063



(1,745
)Net decrease in cash and cash equivalents


(63,298
)


(43,785
)


(12,070
)Cash and cash equivalents at beginning of year


142,533



186,318



198,388Cash and cash equivalents at end of year

$
79,235


$
142,533


$
186,318    70




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 For the
    Years Ended December 31, 2008, 2007 and 2006
  (1)
    Bankruptcy
    and Insolvency Filings  No. 09-11092 debtors-in-possession. debtor-in-possession,
         71




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (2)
    Significant
    Accounting Policies  (a)  Description
    of Business
    (b)  Principles
    of Presentation and Consolidation
        (c)  Use
    of Estimates
    (d)  Cash
    Equivalents
   72




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (e)  Accounts
    Receivable, Net of Allowance for Doubtful Accounts
    2008


2007


2006(In thousands)Balance at beginning of year

$
12,276


$
10,267


$
11,756Provision


2,617



4,448



3,820Write-offs


(4,352
)


(3,113
)


(6,419
)Recoveries and other


94



674



1,110Balance at end of year

$
10,635


$
12,276


$
10,267   (f)  Inventories
  first-in,
  (g)  Long-Lived
    Assets
        (h)  Derivative
    Financial Instruments
   73




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (i)  Investments
            (j)  Goodwill
    and Other Intangible Assets
         74




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (k)  Pension
    Plans and Other Postretirement Benefits
  General
            Long-Term
    Rate of Return on Assets
       75




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Discount
    Rate
      (l)  Income
    Taxes
      (m)  Revenue
    Recognition
    (n)  Foreign
    Currency Translation
   76




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (o)  Earnings
    (Loss) per Share
    (p)  Stock-based
    Compensation
        Year Ended December 31,2008


2007


2006(In thousands)Total stock-based compensation expense included in income (loss)
    from continuing operations

$
2,179


$
2,432


$
2,580   (3)
    Dispositions
    and Discontinued Operations       77




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year EndedDecember 31,2006(In thousands)Operating revenue:Advertising

$
4,101Circulation


972Job printing and other


569Total operating revenue


5,642Operating costs and expenses:Newsprint


383Compensation


2,896Other operating costs


2,041Depreciation and amortization


159Total operating costs and expenses


5,479Operating income

$
163     (4)
    Reorganization
    Activities   78




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (5)
    Other
    Current Assets      (6)
    Investments
    and Fair Value    No. FAS 157-2,
    Level 1
  Level 2
  Level 3
 79




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    Total


Level 1


Level 2


Level 3Assets:Investment in Canadian commercial paper, net

$
7,400


$



$



$
7,400Investment in other securities


407



168







239Liabilities:














       CanadianCommercial


OtherTotal


Paper


SecuritiesBalance as of December 31, 2007

$
37,259


$
36,000


$
1,259Realized gains/(losses) included in earnings(a)


783



1,108



(325
)Unrealized gains/(losses), net(b)


(8,700
)


(8,700
)


Purchases, (sales), issuances and settlements, net


(21,695
)


(21,000
)


(695
)Foreign exchange


(8
)


(8
)


Balance as of December 31, 2008

$
7,639


$
7,400


$
239     (a)
    
    Realized gains and losses on securities are recorded as
    Other income (expense), net in the Consolidated
    Statements of Operations.(b)
    
    Declines in values determined to be other than temporary on
    available-for-sale securities are recorded in Other income
    (expense), net in the Consolidated Statements of
    Operations.    December 31,2008


2007(In thousands)Gross unrealized holding gains (losses) on available-for-sale
    securities:Equity securities

$
(366
)

$
158Less  deferred tax expense






(17
)Unrealized gains on available-for-sale securities included in
    stockholders equity (deficit)

$
(366
)

$
141    80




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  back-up
       81




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (7)
    Property,
    Plant and Equipment  December 31,2008


2007(In thousands)Land

$
6,897


$
9,053Building and leasehold interests


29,973



93,681Machinery and equipment


25,632



204,192Construction in progress


593



2,599Less: accumulated depreciation






(146,170
)$
63,095


$
163,355         Net Book Value atDecember 31, 2008





Adjusted Cost atDescription

Before Write-Down


Write-Down


December 31, 2008Land

$
7,341


$
(444
)

$
6,897Building and leasehold interests


49,130



(21,081
)


28,049Machinery and equipment


76,716



(49,203
)


27,513Construction in progress


1,774



(1,138
)


636$
134,961


$
(71,866
)

$
63,095      82




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (8)
    Goodwill
    and Intangible Assets        Total(In thousands)Balance as of January 1, 2007 and December 31, 2007

$
124,301Impairment charge


(124,301
)Balance as of December 31, 2008

$
     December 31,2008


2007(In thousands)Subscriber and advertiser relationships:Gross carrying amount

$



$
135,880Accumulated amortization






(47,645
)Net book value

$



$
88,235      83




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Gross


Accumulated


Impairment


NetAmount


Amortization


Charge


Amount(In millions)Goodwill

$
149.6


$
(25.3
)

$
(124.3
)

$
Subscriber and advertiser relationships


135.9



(50.9
)


(85.0
)


Total

$
285.5


$
(76.2
)

$
(209.3
)

$
         (9)
    Other
    Assets  December 31,2008

2007(In thousands)Security deposits

$
1,679


$
683Other


281



566$
1,960


$
1,249   (10)
    Accounts
    Payable and Accrued Expenses  December 31,2008


2007(In thousands)Accounts payable

$
24,364


$
34,067Accrued expenses:Labor and benefits


23,456



28,665Professional fees and legal settlements(1)


28,206



25,028Current pension and postretirement liability


3,915



6,478Other


13,174



18,383$
93,115


$
112,621     (1)
    
    See Note 17 Items included in Corporate
    Expenses  (b). 84




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (11)
    Long-Term
    Debt  December 31,2008


2007(In thousands)Non-competition agreements

$



$
38



38Less:Current portion included in current liabilities






35$



$
3       (12)
    Leases      (In thousands)2009

$
5,2212010


4,0862011


3,9172012


4,0162013


4,118Thereafter


25,156$
46,514   (13)
    Financial
    Instruments  (a)  Fair
    Values
       85




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (b)  Derivative
    Financial Instruments
    (14)
    Stockholders
    Equity  Preferred
    Stock
    Class A
    and Class B Common Stock
      Shareholder
    Rights Plan (SRP)
       86




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Common
    Stock Repurchases and Issuance of Treasury Stock
  Form 10-K.
      Dividends
    and Dividends Payable
     87




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (15)
    Stock-Based
    Compensation  Stock
    Options
          Form S-8
  Forms S-8
 88




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-


Weighted-Average


Average


AggregateNumber of


Exercise


Remaining


IntrinsicOptions


Price


Term


Value(Months)


(In thousands)Options outstanding at December 31, 2007


395,725


$
8.19Options granted





$
Options exercised





$







$
Options forfeited


(79,670
)

$
(8.71
)Options expired


(18,372
)

$
(10.66
)Options outstanding at December 31, 2008


297,683


$
7.90



33


$
Options exercisable at December 31, 2008


297,683


$
7.90



33


$
     Options





Options ExercisableNumber


Outstanding





NumberOutstanding at


Weighted-Average





Exercisable atDecember 31,


Remaining


Weighted Average


December 31,


Weighted-AverageRange of Exercise Prices

2008


Contractual Life


Exercise Price


2008


Exercise Price$ 6.69 - $ 8.67


248,753



2.88 years


$
7.44



248,753


$
7.44$10.17 - $10.57


48,930



1.89 years


$
10.25



48,930


$
10.25$ 6.69 - $10.57


297,683



2.72 years


$
7.90



297,683


$
7.90     Year Ended December 31,2008


2007


2006(In thousands)Total intrinsic value of stock options exercised

$



$



$
1,047        89




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Deferred
    Stock Units
          Weighted-Average





AggregateNumber of


Grant Date


Weighted-Average


IntrinsicUnits


Fair Value


Remaining Term


Value(Months)


(In thousands)Unvested at December 31, 2007


2,316,275


$
1.34DSUs granted


441,092


$
0.59DSUs vested


(1,756,507
)

$
(1.17
)





$
581DSUs forfeited


(181,608
)

$
(1.30
)Unvested at December 31, 2008


819,252


$
1.31



22


$
41   Year Ended December 31,2008


2007


2006(In thousands)Total fair value of DSUs granted

$
259


$
3,938


$
975Intrinsic value of DSUs vested

$
581


$
1,551


$
1,481  90




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (16)
    Employee
    Benefit Plans  Defined
    Contribution Plans
    Defined
    Benefit Plans
           91




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006(In thousands)Service cost

$
1,252


$
1,305


$
1,526Interest cost


18,508



18,456



18,653Expected return on plan assets


(24,589
)


(26,158
)


(25,609
)Amortization of losses


1,079



2,666



2,825Settlement and curtailment (gain) loss


239



458



(67
)Amortization of transitional obligation


112



112



112Amortization of prior service costs


144



183



198Net periodic benefit cost (credit)

$
(3,255
)

$
(2,978
)

$
(2,362
)     December 31,2008


2007(In thousands)Benefit obligation at the beginning of the year

$
363,372


$
348,179Service cost


1,252



1,305Interest cost


18,508



18,456Participant contributions


2



5Currency translation differences


(47,944
)


43,770Settlements and transfers


(1,319
)


(1,380
)Actuarial (gain) loss


(24,541
)


(16,029
)Benefits paid


(35,738
)


(30,934
)Benefit obligation at the end of the year


273,592



363,372Fair value of plan assets at the beginning of the year


412,455



351,624Actual return on plan assets


(74,799
)


34,628Currency translation differences


(55,390
)


51,271Settlements and transfers


(1,754
)


(1,388
)Employer contributions


10,443



7,249Participant contributions


2



5Benefits paid


(35,738
)


(30,934
)Fair value of plan assets at the end of the year


255,219



412,455Funded status

$
(18,373
)

$
49,083  92




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007(In thousands)Prepaid pension asset

$
33,323


$
89,512Pension liability included in current liabilities

$
(1,845
)

$
(3,993
)Pension liability included in noncurrent liabilities

$
(49,852
)

$
(36,436
)Accumulated other comprehensive loss, before income taxes

$
118,432


$
59,070     December 31,2008


2007(In thousands)Net actuarial losses

$
116,744


$
56,907Prior service costs


876



1,240Net transition obligation


812



923$
118,432


$
59,070         December 31,2008


2007(In thousands)Projected benefit obligation

$
99,380


$
111,084Accumulated benefit obligation

$
95,996


$
107,841Fair value of plan assets

$
47,684


$
70,655     December 31,2008


2007(In thousands)Projected benefit obligation

$
174,212


$
252,288Accumulated benefit obligation

$
174,212


$
252,288Fair value of plan assets

$
207,535


$
341,800  93




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Assumptions
    December 31,2008

2007

2006Discount rate

6.25% - 7.20%

5.50% - 6.25%

5.00% - 5.75%Expected return on plan assets

3.75% - 8.00%

5.50% - 8.00%

5.50% - 8.25%Compensation increase

3.0%

3.0%

3.0%     Pension Benefits2008

2007Discount rate


6.90
%


5.67
%Rate of compensation increase


2.39
%


2.53
%     Pension Benefits2008


2007


2006Discount rate


6.90
%


5.67
%


5.18
%Expected long-term return on plan assets


4.55
%


6.53
%


7.22
%Rate of compensation increase


2.39
%


2.53
%


2.47
%     Pension
    Plan Assets
    Plan Assets atDecember 31,Asset Category

2008


2007Equity securities


25.7
%


55.9
%Debt securities


47.0
%


38.2
%Other


27.3
%


5.9
%Total


100.0
%


100.0
%      94




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Historically competitive investment returns and risks;
    Stability and financial soundness of companies offering funds;
    Desirability of offering funds run by different
    managers; and
    Managers investment philosophy and style.    Postretirement
    and Postemployment Benefits
        2008


2007


2006(In thousands)Service cost

$
10


$
10


$
27Interest cost


1,108



1,103



1,357Settlement gain


(3,225
)






Amortization of gains


(287
)


(1,782
)


(788
)Net periodic postretirement benefit cost (credit)

$
(2,394
)

$
(669
)

$
596     December 31,2008


2007(In thousands)Accumulated postretirement benefit obligation at the beginning
    of the year

$
30,925


$
29,476Service cost


10



10Interest cost


1,108



1,103Settlement gains


(3,248
)


Actuarial gains


(2,575
)


(2,495
)Benefits paid


(2,107
)


(2,146
)Currency translation differences


(5,086
)


4,977Accumulated postretirement benefit obligation at the end of the
    year


19,027



30,925Fair value of plan assets at the end of the year


1,390



2,008Unfunded status

$
17,637


$
28,917  95




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007(In thousands)Unfunded status, included in current liabilities

$
2,000


$
2,400Unfunded status, included in other liabilities

$
15,637


$
26,517Unrecognized net gain, included in accumulated other
    comprehensive income, net of tax

$
11,080


$
11,515         2008


2007Healthcare cost trend assumed next year


8.0
%


7.4
%Rate to which the cost trend is assumed to decline (the ultimate
    trend rate)


4.5
%


5.0
%Year that rate reaches ultimate trend rate


2028



2012    96




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Pension
    and Other Benefit Payments
    Pension


PostretirementYear

Benefits


Benefits(In thousands)2009

$
26,212


$
2,0002010

$
25,535


$
2,0622011

$
25,088


$
2,1222012

$
24,730


$
2,1782013

$
24,292


$
2,2252014-2018

$
114,657


$
11,562   (17)
    Other
    Operating Costs and Corporate Expenses  Items Included
    in Other Operating Costs
    Year Ended December 31,2008


2007


2006(In thousands)Reorganization costs (Note 4)

$
2,674


$
6,352


$
9,201Severance expense


4,692



405



2,642Write-off of capitalized direct response advertising costs(a)






15,191



Write-off of capitalized software(b)






1,487



882Costs related to outsourcing of certain newspaper distribution
    activities, including severance


(163
)


1,770



Loss on disposal or write-down of assets, net (see Note 7)


3,943







Costs related to printing plant relocation


1,235







Restitution and settlement costs  circulation matters


(584
)






   (a)  Write-off
    of Capitalized Direct Response Advertising Costs
  93-7 (SOP 93-7).
  SOP 93-7
  (b)  Write-off
    of Capitalized Software
   97




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Items Included
    in Corporate Expenses
    Year Ended December 31,2008


2007


2006(In thousands)Bad debt expense related to loan to subsidiary of Hollinger
    Inc.(a)

$



$
33,685


$
Loss on sale of newspaper operations(b)


10,538



13,603



Settlement of claims with Hollinger Inc.(c)


2,490







Severance expense






(176
)


6,954Unclaimed property costs


(456
)






2,000   (a)  Bad
    Debt Expense Related to Loan to Subsidiary of Hollinger Inc.
    (b)  Loss
    on Sale of Newspaper Operations
      (c)  Settlement
    of Claims with Hollinger Inc.
    (18)
    Indemnification,
    Investigation and Litigation Costs, Net of Recoveries   98




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Incurred SinceYear Ended December 31,


Inception through2008


2007


2006


December 31, 2008(6)(In thousands)Special Committee investigation costs(1)

$
3,462


$
6,216


$
4,743


$
67,142Litigation costs(2)


713



1,533



6,376



29,191Indemnification fees and costs(3)


9,396



47,776



18,949



119,110Recoveries(4)


(2,000
)


(47,718
)


(47,475
)


(129,568
)$
11,571


$
7,807


$
(17,407
)


85,875(33,265
)(5)$
52,610
(7)     (1)
    
    Costs and expenses arising from the Special Committee
    investigation. These amounts include the fees and costs of the
    Special Committees members, counsel, advisors and experts.
    The Special Committee was dissolved in November 2008, and the
    Special Committees related legal matters were turned over
    to the Companys Board of Directors and management.(2)
    
    Largely represents legal and other professional fees to defend
    the Company in litigation that has arisen as a result of the
    issues the Special Committee has investigated, including costs
    to defend the counterclaims of Hollinger Inc. and Black in
    Hollinger International Inc. v. Conrad M. Black,
    Hollinger Inc., and 504468 N.B. Inc.described in the
    Companys previous filings.(3)
    
    Represents amounts the Company has been required to advance in
    fees and costs to indemnified parties, including former officers
    and directors and their affiliates and associates who are
    defendants in the litigation brought by the Company or in the
    criminal proceedings. See Black v. Hollinger
    International Inc.described in the Companys
    previous filings.(4)
    
    Represents recoveries including $2.0 million related to the
    settlement with Hollinger Inc. for legal fees incurred in
    connection with Hollinger Inc.s CCAA proceedings,
    $47.7 million related to a settlement with Radler described
    above, $47.5 million in a settlement with certain of the
    Companys directors and officers insurance carriers in
    2006, $30.3 million in a settlement with Torys LLP in 2005
    and $2.1 million in recoveries of indemnification payments
    from Black in 2005. Excludes settlements with former directors
    and officers, pursuant to a restitution agreement reached in
    November 2003, of $1.7 million and $31.5 million
    recognized in 2004 and 2003, respectively, which were recorded
    in Other income (expense), net, and interest related
    to various recoveries and settlements of $15.8 million
    which was recorded in Interest and dividend income.
    Total recoveries, including interest, aggregate
    $176.6 million. In addition, the Radler settlement resulted
    in the collection of $8.5 million of notes receivable. 99




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (5)
    
    Represents amounts received pursuant to the restitution
    agreement described in (4) above.(6)
    
    The Special Committee was formed on June 17, 2003. These
    amounts represent the cumulative net costs from that date.(7)
    
    Including the $7.2 million and $8.5 million received
    from Radler in interest and payment of notes receivable,
    respectively (see (4) above), and the Companys
    potential share of insurance proceeds held in escrow (see
    Note 22(a) Stockholder Class Actions) of
    $20.8 million, the amounts collected by the Special
    Committee aggregate $199.3 million and total expenses
    aggregate $215.4 million.  (19)
    Other
    Income (Expense), Net  December 31,2008


2007


2006(In thousands)Loss on extinguishment of debt(a)

$



$
(60
)

$
Expenses related to FDR Collection(b)


(1,500
)






Write-down of investments(c)


(8,700
)


(12,200
)


Foreign currency gains (losses), net


18,437



(16,569
)


2,943Gain (loss) on sale of investments


1,108



1,019



(76
)Equity in losses of affiliates


(74
)


(184
)


(259
)Other


768



150



34$
10,039


$
(27,844
)

$
2,642     (a)
    
    In 2007, the Company retired $6.0 million of its
    9% Senior Notes and recognized a premium for early
    redemption. See Note 11.(b)
    
    The Company has made several acquisitions of papers and other
    memorabilia of President Franklin Delano Roosevelt (the
    FDR Collection). The Company has recorded an
    impairment for the remaining carrying value of the FDR
    Collection of $1.5 million during 2008 and has fully
    reserved the initial purchase price. The U.S. National Archives
    has asserted an ownership claim to a portion of the collection
    known as the Grace Tully Collection.(c)
    
    In 2008 and 2007, the Company recorded $8.7 million and
    $12.2 million of impairment charges, respectively, related
    to the valuation of its Canadian CP. See Note 6.  (20)
    Income
    Taxes    2008


2007


2006(In thousands)Income tax expense (benefit) allocated to:Loss from continuing operations before income taxes

$
(13,129
)

$
(420,888
)

$
57,431Income from discontinued operations






1,066



35,173Other comprehensive income (loss)  foreign currency
    translation adjustments


1



106



4Other comprehensive income (loss)  unrealized holding
    gain (loss) on marketable securities






2



(665
)Other comprehensive income (loss)  pension adjustment


(10,713
)


8,166



3,117$
(23,841
)

$
(411,548
)

$
95,060  100




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Current


Deferred


Total(In thousands)Year ended December 31, 2008:U.S. federal

$



$
13,619


$
13,619Foreign


(30,831
)


1,822



(29,009
)State and local


315



1,946



2,261$
(30,516
)

$
17,387


$
(13,129
)Year ended December 31, 2007:U.S. federal

$
(11,509
)

$
116,590


$
105,081Foreign


(556,833
)


460



(556,373
)State and local






30,404



30,404$
(568,342
)

$
147,454


$
(420,888
)Year ended December 31, 2006:U.S. federal

$
3,910


$
12,091


$
16,001Foreign


43,138



(5,222
)


37,916State and local


606



2,908



3,514$
47,654


$
9,777


$
57,431     2008


2007


2006(In thousands)U.S.

$
(382,240
)

$
(121,511
)

$
(29,351
)Foreign


15,612



(29,346
)


9,152$
(366,628
)

$
(150,857
)

$
(20,199
)    101




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006(In thousands)Income tax benefit at federal statutory rate

$
(128,320
)

$
(52,800
)

$
(7,070
)Impact of taxation at different foreign rates


2,209



4,191



(1,725
)U.S. state and local income tax benefit, net of federal tax
    impact


(18,724
)


(8,298
)


(1,462
)Tax impacts of the disposition and liquidation of Canadian
    operations, including book and tax basis differences, foreign
    exchange differences and related items(a)










(10,551
)Provision for tax contingencies










29,042Reduction of tax contingency accruals due to the resolution of
    uncertainties(b)(e)


(34,650
)


(578,530
)


(39,297
)Reversal of U.S. deferred tax benefits related to disposition
    and liquidation of Canadian operations(c)






157,344



Interest on tax contingency accruals


49,601



47,967



81,523Items non-deductible or non-includible for income tax purposes


397



4,228



831Income tax expense (benefit) on intercompany and other
    transactions involving
    non-U.S.
    operations(b)


17,582



(28,797
)


2,241Increase in valuation allowance, net(d)


99,810



35,374



5,366Other, net


(1,034
)


(1,567
)


(1,467
)Income tax expense (benefit) allocated to loss from continuing
    operations

$
(13,129
)

$
(420,888
)

$
57,431     (a)
    
    During 2008, the Company recognized the effects of the CanWest
    arbitration decision. The pre-tax charge of $10.5 million
    represents an adjustment related to the gain/loss on sale of
    newspaper operations. The related tax year had previously been
    closed with the Canada Revenue Agency (CRA) and the
    Company will receive no tax benefit for the loss. See Note 17.(b)
    
    During 2007, the Company reached an agreement with the CRA
    settling certain tax issues largely related to the disposition
    of certain Canadian operations in 2000. As a result of the
    settlement, the Company reduced its tax contingency accruals by
    $571.8 million and recorded a U.S. tax benefit of
    $14.9 million related to the deduction arising from the
    settlement.(c)
    
    The Company had recorded deferred tax assets for the U.S. tax
    benefits that were related to the 2000 disposition and
    liquidation of Canadian operations. Upon the settlement of the
    Canadian tax issues with the CRA, the Company reversed the U.S.
    deferred tax asset of $157.3 million and the corresponding
    valuation allowance.(d)
    
    The net increase in the valuation allowance in 2007 includes the
    effects of the following significant transactions. The Company
    recorded $193.5 million of increases in the valuation
    allowance to conform with its accounting policy that requires
    deferred tax assets be reduced to a level where they are more
    likely than not to be realized. The Company recorded a reduction
    of the valuation allowance in the amount of $157.3 million
    as described in (c) above.(e)
    
    In September 2008, the Company received a favorable ruling from
    the CRA that it completed an audit of the Companys 2000
    tax year, which resulted in no changes to the tax return. As a
    result, the Company has recorded a tax benefit, including
    interest through the quarter ended June 30, 2008, of
    $34.7 million reflecting the reversal of certain contingent
    tax liabilities no longer deemed necessary. 102




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2008


2007(In thousands)Deferred tax liabilities

$
20,006


$
106,907Deferred tax assets, net of valuation allowance


(10,437
)


(48,564
)$
9,569


$
58,343     December 31,2008


2007(In thousands)Deferred tax assets attributable to:Accounts receivable, principally due to allowance for doubtful
    accounts

$
1,454


$
2,087Bad debt allowance on loan to subsidiary of Hollinger Inc.






13,474Accrued expenses


5,124



20,502Pension assets


1,349



Postretirement obligations


9,484



15,365Intangible assets(a)


30,514



Investments


21,211



20,796Net operating loss carryforwards


90,976



38,508Claims for restitution


43,964



43,964U.S. tax benefit related to disposition and liquidation of
    Canadian operations






10,849Accrued interest and state income tax effects related to income
    tax contingent liabilities included in Other tax
    liabilities


109,535



93,000Property, plant and equipment, principally due to differences in
    depreciation and deferred gain on exchange of assets(b)


14,170



Capital loss carryovers


7,355



6,745Other


14,388



20,898Deferred tax assets


349,524



286,188Less valuation allowance


(339,087
)


(237,624
)Net deferred tax assets

$
10,437


$
48,564Deferred tax liabilities attributable to:Property, plant and equipment, goodwill and intangible assets,
    principally due to differences in depreciation, amortization and
    deferred gain on exchange of assets(a)(b)

$



$
59,649Pension assets






23,502Deferred gain on disposition of Canadian Newspaper Operations


17,408



21,146Other


2,598



2,610Deferred tax liabilities

$
20,006


$
106,907  103




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    The Company recognized an impairment charge for the entirety of
    its goodwill and intangible assets in 2008. See Note 8. The
    charge resulted in the reversal of $49.4 million in
    deferred tax liabilities and the establishment of
    $30.5 million in deferred tax assets for which a valuation
    allowance, in the same amount, has been established.(b)
    
    The Company recognized an impairment charge of
    $71.9 million for property, plant and equipment in 2008.
    See Note 8. The charge resulted in the reversal of
    $14.5 million in deferred tax liabilities and the
    establishment of $14.2 million in deferred tax assets for
    which a valuation allowance, in the same amount, has been
    established.              Balance at January 1, 2008

$
368,262Reduction due to ruling from the CRA on tax year 2000


(19,280
)Other


(2,601
)Balance at December 31, 2008

$
346,381    104




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (21)
    Earnings
    (Loss) per Share    Year Ended December 31, 2008Loss


Shares


Per-Share(Numerator)


(Denominator)


Amount(In thousands, except per share amounts)Basic EPSLoss from continuing operations

$
(353,499
)


82,010


$
(4.31
)Effect of dilutive securities










Diluted EPSLoss from continuing operations

$
(353,499
)


82,010


$
(4.31
)     Year Ended December 31, 2007Loss


Shares


Per-Share(Numerator)


(Denominator)


Amount(In thousands, except per share amounts)Basic EPSIncome from continuing operations

$
270,031



80,446


$
3.36Effect of dilutive securities






215



Diluted EPSIncome from continuing operations

$
270,031



80,661


$
3.35  105




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2006Loss


Shares


Per-Share(Numerator)


(Denominator)


Amount(In thousands, except per share amounts)Basic EPSLoss from continuing operations

$
(77,630
)


85,681


$
(0.91
)Effect of dilutive securities










Diluted EPSLoss from continuing operations

$
(77,630
)


85,681


$
(0.91
)     (22)
    Commitments
    and Contingencies  (a)
    Litigation  Litigation
    Involving Controlling Stockholder, Senior Management and
    Directors
  Hollinger International Inc. v. Hollinger Inc., et
    al No. 04C-0698.
    Stockholder
    Class Actions
  In re Hollinger International Inc. Securities
    Litigation,
    No. 04C-0834 and/or
 106




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Sun-Times
    Media Group, Inc. v. Black
  No. 3518-VCS, United States v. Black, et al.
  Black v.
    Breeden, et al.
    United
    States Securities and Exchange Commission v. Conrad M.
    Black, et al.
     107




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Form 10-K, Form 10-K,
    CanWest
    Arbitration
      CanWest
    and The National Post Company v. Hollinger Inc., Hollinger
    International Inc., the Ravelston Corporation Limited and
    Ravelston Management, Inc.
  National Post
 108




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other
    Matters
    Other Matters
  (b)  Guarantees
    or Indemnifications
  (i)  Dispositions
  and/or
      (ii)  Letters
    of Credit
    (iii)  Other
   109




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (c)  Canadian
    Ownership Matters
        (d)  Commitments
    (23)
    Related-party
    Transactions    (a) Black-Amiel (Black-Amiel) Black-Amiel
 110




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Hollinger
    International Inc. v. Ravelston, RMI and Hollinger
    Inc.
    (b)
      (c)
  (d)
 111




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (e)
  (f)
  (g)
  (h)
  (i)
       112




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      and/or
        (24)
    Liquidity
    Considerations  Bankruptcy
    and Insolvency Filings
  and/or
 113




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    and Cash Equivalents
  back-up
  Investments
    Corporate
    Structure
    Factors
    That Are Expected to Affect Liquidity in the Future
  Potential
    Cash Outlays Related to Accruals for Income Tax Contingent
    Liabilities
    (In thousands)Income taxes payable

$
448Deferred income tax liabilities


9,569Other tax liabilities


607,960$
617,977      114




---



##### Table of Contents



SUN-TIMES
    MEDIA GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Potential
    Cash Outflows Related to Operations
    (25)
    Quarterly
    Financial Data (Unaudited)    2008First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(1)(In thousands, except per share data)Total operating revenue

$
81,004


$
82,971


$
78,826


$
81,049Operating loss

$
(25,768
)

$
(24,013
)

$
(227,775
)

$
(103,745
)Net loss

$
(35,843
)

$
(37,751
)

$
(168,751
)

$
(111,154
)Net loss per basic share(a)

$
(0.44
)

$
(0.46
)

$
(2.04
)

$
(1.34
)Net loss per diluted share

$
(0.44
)

$
(0.46
)

$
(2.04
)

$
(1.34
)     (1)
    
    The Company completed the valuation of its property, plant and
    equipment pursuant to an impairment test undertaken in the third
    quarter. As a result of the valuation, the Company recognized an
    impairment charge of $71.9 million (before and after tax)
    of $0.87 per share.  2007First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Total operating revenue

$
91,717


$
94,744


$
92,539


$
93,258Operating income (loss)

$
5,679


$
(80,639
)

$
(23,227
)

$
(42,034
)Income (loss) from continuing operations

$
(4,823
)

$
527,980


$
(193,991
)

$
(59,135
)Net income (loss)

$
(4,823
)

$
527,980


$
(192,392
)

$
(59,135
)Earnings (loss) from continuing operations per basic share

$
(0.06
)

$
6.57


$
(2.41
)

$
(0.73
)Earnings (loss) from continuing operations per diluted share

$
(0.06
)

$
6.56


$
(2.41
)

$
(0.73
)Net earnings (loss) per basic share(a)

$
(0.06
)

$
6.57


$
(2.39
)

$
(0.73
)Net earnings (loss) per diluted share

$
(0.06
)

$
6.56


$
(2.39
)

$
(0.73
)     (a)
    
    Earnings (loss) per share is computed independently for each of
    the quarters presented. Therefore, the sum of the quarterly
    earnings (loss) per share does not necessarily equal the total
    for the year. 115